Term life insurance is an effective risk management tool wherein the insurance provider offers coverage against the life of the policyholder. Such plans are fairly straightforward and are meant for those who wish to secure their loved one's financial future. Level term insurance policies are the most popularly purchased, given that the premiums remain constant throughout the term.Read more
Level term life insurance is a type of pure risk term protection policy that provides uniform coverage throughout the policy term at constant premium rates. The assigned beneficiaries can claim the death benefit amount on the death of the life assured, provided that premiums have been duly paid. Level premium policies are ideal because policyholders can commit to a standard investment at the time of policy issuance without ever worrying about increasing premium rates.
Policyholders of level term life policies are covered for a defined period, often ranging from 10 to 40 years. Unlike increasing or decreasing term insurance, the assured benefit amount in level term policies remains constant throughout the entire term of the policy.
10-year level term life insurance plans are pure risk protection plans with a policy term of 10 years. As the name indicates, these plans charge level premiums against the sum assured amount, insuring the policyholder for the said period. If the life assured were to die within this 10-year tenure, the nominees will receive the guaranteed death benefit that they can use to fund future needs.
The benefits of 10-year level premium policies are primarily twofold. First, once the premium rates are set by the insurer, it remains the same for the entire duration of the policy. Secondly, the 10-year policy term is not a long-term commitment and, therefore, is a fairly feasible financial planning strategy.
There are several upsides to purchasing such term policies such as:
Affordability - Term policies are generally more affordable even against high sum assured, given that they offer protection only for a brief period (10 years in this case).
Predictability - Once the premiums are decided against the desired sum assured, there are no changes to the policy. You do not have to worry about hikes in premiums once the policy is in force till the maturity of the policy.
Efficient Budgeting - Because you are already aware of the amount that you will have to spend on your policy, you can budget other expenses accordingly. Further, since the nominees have a fair idea of the benefit receivable, they can start planning finances immediately after the death of the policyholder.
Income Source - The most obvious reason for buying a level-term policy is to ensure an income stream for your dependents after your death. With a 10-year level term life policy, you should be able to create a decent financial cushion for your loved ones to fall back on after your demise.
Scope of Extra Protection - You can add riders to your level term life policies that offer extra protection against accidental death, disability, and critical illnesses.
This is the most crucial aspect of purchasing insurance. If the benefit amount does not even cover the basic cost of living for your dependents, the whole purpose of term insurance is lost. Given that 10 years is not a significant period, you should be all the more strategic with the sum assured under a 10-year level term life insurance. Moreover, such plans do not come with the option of increasing the sum assured mid-term. Therefore, you should only decide after carefully evaluating factors such as the number of dependents, outstanding debt obligations, rate of inflation, cost of living, education expenses, etc.
Ideally, the sum assured on death should be at least 10 times your current income. Further, it should also be in a range wherein the premium charged against it falls in your budget. Remember that securing your family’s future against the risk of your life should not be at the cost of your current financial health. Ten years is not a lot of time, and, therefore, the sum assured should not be so high that your earnings barely cover the monthly premiums.
Nowadays, insurance companies feature online premium and benefit calculators on their websites which can be personalized per your needs to get prompt estimations of the premiums and the sum assured. You can also carry out extensive financial analysis of your earnings, assets, and future finances using other financial planning tools.
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